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Advertiser Tidbits for the week of 5/09/05

Automotive:

• In another blow to domestic makers, GM and Ford stock was downgraded to “junk” status by Standard & Poors. And according to Automotive News' analysis of Edmunds.com incentive data, GM accounted for 38.6% of the incentives offered during March, but got only 26.5% of the sales. Ford gave 21.5% of incentives for 13.5% of the business, and Chrysler offered 18.6% of incentives for a 13.5 share of sales. For the foreign makes the ratio was reversed. Toyota’s share of incentives was 5.5%, its share of business 12.9%. For Honda it was 1.4% and 8.2%, and for Nissan, 4.3% and 6.7%.
• Promo magazine says that two Mitsubishi marketing execs resigned this week in protest of the small ($25 million) ad budget being devoted to the 2006 Eclipse model.
• Hyundai and Kia have moved up their scheduled launches of hybrids in the U.S. to late in 2006. They had not be expected to be introduced until at least 2007. Hyundai is also putting its toe in the luxury market with the launch of a new model in 2007, with the idea of starting its own luxury line like Infiniti or Lexus.
• Hyundai is launching a new campaign for its Sonata model this month, emphasizing the fact that the car is built in the U.S.
• After a strong run in the auto aftermarket business, CSK reported a 3.0% same-store decrease in the latest quarter in its retail division; however commercial same store sales were up 4.3%. And Goodyear had a record first quarter with $4.8 billion in sales, up 11%. Replacement tire volume was up almost 8%, making up for a drop in “original equipment volume” on new vehicles.

Retailing:

• Neiman Marcus has agreed to be acquired by an investment group made up of Texas Pacific Group and Warburg Pincus. Women’s Wear Daily has said that the new owner will be looking to speed up expansion of the chain around the country.
• Wal-Mart estimates that its April same store sales rose just 0.9%, and that was because of strong demand for food. That does not bode well for other retail results that will be released on Thursday. But Wal-Mart is not deterred in is expansion plans. It plans to add 55 million square feet of retail space: 250 supercenters, 45 discount stores, 30 neighborhood markets and 40 Sam’s Clubs.
• Nike has told Sears it will no longer sell products to the chain after the current contract expires this fall; the move appears to be based on an aversion to being sold in Kmart stores. Nike reentered Sears in 1999 after a 12-year hiatus started when Sears offered coupons on Nikes in 1987.
• Finlay Enterprises, which licenses almost 1000 jewelry departments in major stores, said the retail environment turned softer in March and April, resulting in just a 0.5% quarterly same-store increase.
• Safeway had a very good first quarter; same store sales rose 4.4%, excluding strike-affected stores. It pans to open 30 new Lifestyle stores this year and remodel almost 300 to that format.
• Levitz Home Furnishings is closing its 47-unit Seaman’s chain, converting about 25 of them to the Levitz name and shuttering the rest.
• While furniture sales doesn’t always run in tandem with the rest, Haverty’s results for April offer some optimism. It produced a 7.7% same-store increase, pulling the Y-T-D numbers up to +5.3%.
• Blockbuster said rental fees were up more than 20% last quarter, fueled by its No Late Fees program. But the company actually lost money based on costs associated with starting that program, plus investments in Blockbuster Online, and money spent in the failed attempt to buy out Hollywood Entertainment.

Drug Store & Supermarket Chains:

• While some of its competitors have been slowing down lately, CVS still had an 8.2% same-store increase in its latest quarter; pharmacy sales up 8.8% and front-end sales up 6.9%. Counting the hundreds of former Eckerd stores it acquired, total sales were up almost 35% to over $9 billion.
• GNC said sales were down in all its segments - company-owned stores, franchises, and Rite Aid “store-within-a-store” locations, due to “significant declines...in sales of low carb products.”
• Rite Aid had a 1.9% same-store sales decrease for April and blamed the shift of Easter into March for it. But Walgreen still had a 5.3% gain for April, and an 8.5% comp store gain for March/April combined.
• C-store chain Maverik Country Stores is testing use of self-serve automated bill payment touchscreens at stores in Salt Lake City and Boise. Customers can pay wireless, utility, and cable bills, according to Convenience Store News.
• Buehler Foods, which operates 28 food stores under the banner Buy Low, 16 stores in the Louisville area under banner Buehler’s Market, and 22 Save A Lot stores, has filed for Chapter 11 bankruptcy protection.
• Long’s Drugs same store sales in April were off 2.6%, on a scary drop of 7.7% in front end sales.
• BI-LO LLC, parent of BI-LO and Bruno’s is selling 113 of current 426 stores, and will close another three, to concentrate its efforts in core markets in the Southeast. By core markets, the company means those where it holds the largest or second largest share of business. Most of the stores being divested are being purchased by Southern Family Markets Acquisition, LLC, a division of food distributer C&S.

Fast Food & Restaurant Chains:

• A number of restaurant chains reported April comp sales late last week. Denny’s was up 3%, but purely on increases in guest checks, the number of guests fell 1.4%. At Darden, Olive Garden same store revenues rose 8%-9% and Red Lobster increased 1% to 2%. Smith & Wollensky comps were up 9.4% for the month.
• Krystal Co., based in Chattanooga, plans to open 45 or more restaurants in Dallas, Houston, Austin and San Antonio over the next four years, making Texas the chain’s fastest growing region.
• Australian investment firm Pacific Equity Partners is buying Worldwide Restaurant Concepts, parent of the Sizzler and Pat & Oscar’s chains.
• Panera Bread posted a 6.2% same-store sales increase for April, and is up 6.5% so far this year. Papa John’s had a good April with same-store sales up 8.6% after a +3.8% first quarter. But Friendly first quarter comps were down 3.9% in company-owned units while the franchisees were able to post a 1.9% gain.
• Subway has not specifically targeted the teen market since “a few years ago,” but will return to concentrating on that segment in the summer. It now sees teens as a “largely untapped growth opportunity,” according to the VP of the Franchisee Advertising Trust Fund.
• CKE Restaurants reported Carl’s Jr.’s same store sales rose for the 26th consecutive month in April, up 1.7%. But Hardee’s comps fell 1.7%. The company said that “record-high gasoline prices and mixed economic news seems to be leading the competition to return to more aggressive discounting tactics.”
• Pernod SA, which is buying Allied Domecq, ended speculation it would sell off Domecq’s food chains Dunkin’ Donuts, Baskin-Robbins, and Togo’s by confirming the chains are for sale. It expects to conduct an auction with all interested parties needing to bid for all three chains in a package.

Telecommunications:

• DirecTV reported a net gain of 505,000 subscribers in the first quarter due mainly, it says, to new customers brought in by phone companies in their bundles. Churn still appears to be a problem. The gross customer additions were 1.14 million. The company lost $41 million during the period, better than last year’s $639 million loss.
• Verizon will buy MCI, and Qwest has stopped bidding. But the question now is Qwest - some analysts believe it does not have the size to survive as a stand-alone, and there are no apparent acquisitions available for it to make right now.

Other Categories:

• It has been a very troubling year for the movie industry. Box office receipts were off 10% in April year-over-year, and are off 6% so far this year. And USA Today says that at least three of the upcoming summer films need to make at least $250 million each in order for this summer not to be the third straight with declining revenues.
• Investment firm Forstmann Little is buying 24 Hour Fitness, which operates 345 clubs in 15 states. The New York Times says private equity firms have been “captivated” by the fitness club industry because of its predictable cash flow and favorable demographic trends.
• The new owner of the 24 Hour Fitness chain says it plans to continue expanding the number of units.
• Progress for America and People for the American Way are spending lots of dollars in opposition to and support of, respectively, the Senate filibuster of judicial nominees. But, as usual, the market list is determined by where swing senators reside, this time Alaska, Arkansas, Maine, Nebraska, North Dakota and Rhode Island.
• Although the first quarter isn’t a large one for amusement parks, Six Flags says it’s encouraged by what it saw from the parks that were open. Advance bookings and season ticket sales for the spring and summer are running well ahead of last year.
• The Atlanta Journal-Constitution says that despite Six Flags’ heavy debt load and earnings losses, it has invested $135 million in its parks for the upcoming season; thirteen amusement parks will get new attractions, as will three of its water parks. Competitor Cedar Fair said its first quarter revenues were adversely affected by record rains in California where it operates Knotts Berry Farm, its biggest winter attraction. But it has high expectations for new attractions on which it has spent $80 million in the off-season.
• Coke plans to test a new drink called Vault that it hopes will compete with Pepsi’s popular Mountain Dew. No word on where those tests are being conducted.

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